CRA has confirmed that Canadian registered charities will not be required to file T3 information returns for internally held trusts.
The Canada Revenue Agency (“CRA”) made the announcement today by way of an email distributed to its charities mailing list.
Background
The Federal Department of Finance introduced new trust reporting rules that generally apply to trusts having a taxation year ending after December 31, 2023. These rules are designed to increase transparency by requiring trusts to report on their settlors, beneficiaries and trustees. Trusts are required to file T3 information returns containing this information, beginning in the spring of 2024. There are significant financial penalties for not complying with the new rules.
While the new rules explicitly exempt trusts that are registered charities, they are silent on trusts that are held within registered charities. Canadian charities were concerned that they would need to file a T3 return in respect of each internally held fund. For some charities, this presented a costly administrative burden. Some large charities—for example, a major university with a large number of scholarship funds or a community foundation with many specific endowments—hold hundreds or even thousands of funds that could be considered trusts.
Our lawyers at Miller Thomson have previously written on this issue (see our August 3, 2023 Social Impact Newsletter article and our September 28, 2023 Wealth Matters article). We have shared our concerns with the Department of Finance and the CRA and expressed the need for the CRA to provide much-needed clarity on this issue urgently. We are grateful to CRA and the Department of Finance for the CRA’s helpful clarification on this issue.
Announcement today
CRA announced today that the new trust reporting requirements will not apply to internal trusts held by charities.
A registered charities does not have to file T3s for each trust or fund it holds internally.
Rather, charities continue to be required to file a T3010 Registered Charity Information Return. On November 9, 2023, CRA confirmed that a new version of the form T3010 (version 24) is being released in January 2024. Charities with fiscal periods ending on or after December 31, 2023 will have to file using this new version of Form T3010. The new version of the form may include additional disclosure obligations relating to trusts held by charities, but that is yet to be seen.
Should you have any questions or concerns, please feel free to reach out to a member of Miller Thomson’s Social Impact Group.
